Crude oil futures edged up on Thursday morning as a United States debt ceiling bill passed the House of Representatives, assuaging fears of a historic default by the world’s largest oil consumer. Prices were also supported by expectations that OPEC+ would uphold its output quota at the organization’s upcoming meeting.

On June 1, Brent Augustfutures were trading at $72.87 per barrel on the London-based ICE Futures Europe exchange, from $76.95/bbl for July futures on May 25.

Dubai front month crude oil (Platts) financial futures for July settled at $70.77 per barrel on the CME on May 31, from $76.78/bbl for June futures on May 24.

Meanwhile, base oil market participants kept an eye on the supply situation not only in Asia, but in other regions as well as tighter conditions elsewhere may be drawing barrels away from Asia. On the other hand, oversupply in other areas such as the U.S. may result in a flood of lower-priced cargoes arriving into the region in the coming weeks, causing prices to weaken. India seemed to be one of the markets that may be particularly susceptible to the effect of an overabundance of imports, just as it enters the monsoon season which causes logistical and transportation disruptions and weaker base oil demand. This would also coincide with high operating rates at local base oil plants given attractive base stock margins compared to gasoil.

Several U.S. export cargoes have been finalized or were being contemplated for shipment to India as sluggish consumption levels have created moderate oversupply conditions at origin. Despite the fact that a key U.S. API Group II base oil plant will be undergoing a turnaround for most of the month of June, at least two other suppliers were heard to be able to offer extra Group II availability. Several U.S. cargoes were slated to arrive in June, July and August.

There were expectations of additional cargoes moving to India from South Korea, Southeast Asia, Europe and the Middle East in the coming weeks. The abundant supply options have placed downward pressure on base oil pricing in India, with figures sliding by $20/t to $30/t week on week, depending on the grade, with the higher decreases affecting Group I supplies. Competitive offers for Group I grades from local producers contributed to the price slump.

There were reports of an 8,000-metric ton cargo having been shipped from Cartagena, Spain, to Mumbai in mid-May. An 8,000-ton parcel consisting of two grades was expected to have been lifted in Rayong, Thailand, for discharge in Mumbai or Hazira or Kandla in late May. About 1,500 tons to 2,000 tons were anticipated to be lifted in Malacca, Malaysia, to West Coast India in first half June. Between 8,000 tons and 12,000 tons were mentioned for shipment from Daesan and/or Pyongtaek, South Korea, to West Coast India during June 20-25. A 5,000-ton cargo was quoted for shipment from Pyongtaek to Mumbai in the first week of June. A second parcel of 3,000 tons was quoted for lifting in Daesan or Pyongtaek to West Coast India in mid or late June. A 2,500-ton cargo was quoted for shipment from Yeosu, South Korea, to Mumbai during June 10-20. A 10,000-ton cargo of three or four base oils grades was expected to be loaded in Yeosu, South Korea, and Rayong and Sri Racha, Thailand, to West Coast India and Jebel Ali, Dubai, in the United Arab Emirates, at the end of June. About 13,000 tons were being discussed for shipment from Yanbu and Jeddah, Saudi Arabia, to Mumbai and Singapore in late June.

In China, high inventories at local producers’ facilities were prompting sellers to offer cargoes at attractive prices, keeping most imports out. There was an oversupply of some Group I grades, as well as Group II light-viscosity cuts. This has discouraged Group I imports from Indonesia, Thailand and Singapore. A couple of large Chinese Group II plants were expected to be restarted last month, following planned shutdowns, contributing to the oversupply situation, but some units were running at reduced rates due to market economics.

A 3,000-ton cargo was expected to be shipped from Antwerp, Belgium, to Nantong for delivery in mid-August. There have also been a number of export transactions concluded in recent weeks, including a 6,000-ton shipment made up of base oils and easy chemicals from Maoming and Qingdao to Mumbai and Kandla, India, in mid-June.

While the robust Chinese economic recovery that many had expected after the lifting of COVID restrictions has been slow to materialize, there has been an improvement in automotive sales, with numbers showing an upward trend in April. Vehicle sales in China surged 83% year-on-year to 2.2 million in April of 2023, after a 10% rise in the previous month, due to a low base comparison from April last year when the country was under a strict zero-COVID lockdown, according to data from the China Association of Automobile Manufacturers. More robust auto sales may prompt increased lubricant demand from OEMs.

Elsewhere in Asia, the plant turnaround schedule was expected to be quite hectic during the next few months, with producers building inventories to cover obligations during the shutdowns and restricting spot supplies. At the same time, the turnarounds would overlap with a seasonal demand slowdown in most regions.

In Northeast Asia, a South Korean Group II and Group III producer has scheduled an extended turnaround which was expected to start in late May. This was heard to have limited shipments going to the United States, particularly as European demand for Group III grades has been strong on the back of a turnaround at a local Group III facility and some cargoes were heard to have been diverted there.

A number of base oil shipments were discussed for export from South Korea this week, aside from those heading to India, and it was heard that a few were moving to the Americas in the U.S. Gulf and the Middle East. A 2,700-ton cargo was on the table for shipment from Yeosu to Koh Sichang, Thailand, in late June. A 1,000-ton parcel was expected to have been lifted in Daesan for Hamriyah, United Arab Emirates, the last week of May.

A Japanese refiner was scheduled to start a two-month turnaround at its refinery in late May as well, which was likely to affect Group I base oil output and limit availability from the producer. A second Japanese producer started a turnaround in April and will wrap it up in June, affecting Group II output.

The sole Taiwanese Group II producer was expected to complete some refinery maintenance in June and July, but this was not anticipated to affect base oil output significantly. The same producer has scheduled a turnaround at its base oils plant in October and was expected to start building inventories ahead of the shutdown, limiting its spot sales. For the time being, however, it was heard that the supplier planned to ship significant amounts of base oils to China and other destinations within Asia this month, including India.

In Southeast Asia, a large facility in Singapore was undergoing maintenance of some of its base oil trains from the end of April until late June, impacting mostly Group II supply. There have been a number of cargoes shipped from other origins in Southeast Asia and the Middle East to Singapore in recent weeks, likely to supplement local production. A 500-ton lot was expected to have been shipped from Malacca, Malaysia, to Singapore at the end of May. Singapore was also involved in the export of about 8,000 tons of base oils to Godau, Nhabe and Haiphong, Vietnam, the first week of June. A 3,000-ton cargo was also mentioned for shipment from Rayong, Thailand, to Merak, Indonesia, in mid-June.

Recent maintenance and unplanned outages at a couple of Indonesian plants have resulted in reduced availability of Group I base stocks, particularly bright stock, and some cargoes have been imported from Singapore.

Spot base oil price assessments in Asia were steady-to-soft this week, with buying and selling indications for some grades having been adjusted down on loosening supply and demand conditions. The price ranges portrayed below reflect discussions, bids and offers, as well as deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were steady to slightly down from the previous week. Spot prices for the Group I solvent neutral 150 grade were lower by $10/t at $910/t-$940/t, but the SN500 was steady at $1,020/t-$1,060/t. Bright stock was hovering at $1,260/t-$1,300/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were assessed steady at $1,010/t-$1,050/t, and the 500N at $1,040/t-$1,090/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was assessed down by $20/t at $720/t-$760/t, and the SN500 was lower by $10/t at $860/t-$900/t. Bright stock prices edged down by $20/t to $980/t-1,020/t, FOB Asia.

The Group II 150N was slightly lower by $10/t at $880/t-$920/t FOB Asia, and the 500N and 600N cuts also edged down by $10/t to $920/t-$960/t, FOB Asia.

In the Group III segment, prices were steady. The 4 cSt was hovering at $1,520-$1,550/t, while the 6 cSt was unchanged at $1,490/t-$1,530/t. The 8 cSt grade was heard at $1,110-1,150/t, FOB Asia, for fully approved product.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com. 

Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.

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